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Theory of consumer behaviour — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsTheory of consumer behaviour2 Marks
Question
Define an indifference curve. Why is it convex to the origin?

OR

Explain why an indifference curve is convex to the origin?

✓

Answer

Indifference curve shows different combinations of good X and good Y which give same level of satisfaction to the consumer.

Indifference curve is convex to origin due to diminishing marginal rate of substitution. Marginal rate of substitution of X for Y refers to the number of units of good Y that the consumer is willing to forego for an additional unit of good X so as to maintain the same level of satisfaction.

$\text{MRS}=\frac{\Delta\text{Y}}{\Delta\text{X}}$

MRS falls because when more and more units of X are obtained, its marginal utility declines and the consumer likes to sacrifice less of Y to obtain an additional unit of X. So, MRS declines.

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